2025 (3) TMI 500 - HC - Central Excise

Prayer quashing and setting aside the order-in-original on the ground that the same was passed by the adjudicating authority contrary to the directions issued by the Central Excise and Service Tax Appellate Tribunal - Central Excise duty on the value of free issue material supplied by the principal manufacturers for the manufacture of the intermediate goods on job work basis - HELD THAT - The respondent is not able to justify the stand of the respondent in not following the directions of the CESTAT and deciding the matter on merits. It is true that the respondent has passed the impugned order without understanding the difference between the manufacture of the final product by the principal manufacturer using the free goods supplied by the end user which were the facts before the Hon ble Apex Court in case of Ujagar Prints and others v. Union of India and others 1988 (11) TMI 106 - SUPREME COURT and the job work done on the intermediate products as in the facts of the present case done by the petitioners and final product manufactured by the principal manufactures using such intermediate product. In such circumstances the CESTAT has rightly applied the decision in case of M/s. International Auto Ltd.(supra) and the matter was only remanded for the purpose of verification of the duty paid by the principal manufacturer on the final product including the intermediate goods upon which the job work was done by the petitioners. Conclusion - The adjudicating authority s order was invalid due to non-compliance with CESTAT s directions. The case was remanded for de novo adjudication by a different officer with specific instructions to verify the duty payment by the principal manufacturer as per CESTAT s mandate. Petition disposed off.

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

- Whether the adjudicating authority erred in not following the directions issued by the Central Excise and Service Tax Appellate Tribunal (CESTAT) to verify whether the principal manufacturer paid duty on the total value of the final products, including the value of free material supplied for job work.

- Whether the adjudicating authority acted beyond its jurisdiction by disregarding the CESTAT's directions and independently adjudicating the matter.

- The applicability of the Supreme Court's decision in M/s. International Auto Ltd. to the facts of the case.

2. ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents:

The legal framework involves the Central Excise Act, 1944, and the Cenvat Credit Rules, 2004. The precedents include the Supreme Court's decisions in M/s. International Auto Ltd. and Ujagar Prints, which address the duty liability concerning job work and the inclusion of free materials in the assessable value.

Court's Interpretation and Reasoning:

The Court focused on the adjudicating authority's failure to comply with CESTAT's specific directions to verify if the principal manufacturer had paid duty on the total value of final products, including free materials. The Court emphasized the importance of judicial discipline and adherence to the appellate tribunal's orders.

Key Evidence and Findings:

The CESTAT had remanded the matter for verification of duty payment by the principal manufacturer, which the adjudicating authority failed to conduct. Instead, the authority attempted to independently reassess the matter, contrary to the CESTAT's instructions.

Application of Law to Facts:

The Court applied the principles from the Supreme Court's decision in M/s. International Auto Ltd., which required verification of duty payment by the principal manufacturer. The adjudicating authority's failure to perform this verification rendered its decision without jurisdiction.

Treatment of Competing Arguments:

The respondent's argument that the adjudicating authority could independently adjudicate the matter was rejected. The Court highlighted the necessity of following the appellate tribunal's binding directions and criticized the authority's disregard for judicial hierarchy.

Conclusions:

The Court concluded that the adjudicating authority's order was without jurisdiction, as it failed to comply with CESTAT's directions. The matter was remanded for fresh adjudication by a different officer, with instructions to verify duty payment as directed by CESTAT.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning:

"If a subordinate tribunal refuses to carry out directions given to it by a superior tribunal in the exercise of its appellate powers, the result will be chaos in the administration of justice..."

Core Principles Established:

The judgment reinforces the principle of judicial discipline, emphasizing that subordinate authorities must comply with the directions of appellate bodies. It also underscores the importance of verifying factual matters as directed by higher authorities before reaching conclusions.

Final Determinations on Each Issue:

The Court determined that the adjudicating authority's order was invalid due to non-compliance with CESTAT's directions. The case was remanded for de novo adjudication by a different officer, with specific instructions to verify the duty payment by the principal manufacturer as per CESTAT's mandate. A token cost was imposed on the respondent for failing to adhere to the appellate tribunal's directions.

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